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As anyone even remotely related to the aesthetic medicine industry knows, private equity is swooping into the space and buying up practices left and right. This same trend played out in other fields of medicine such as dental and orthopedics in the not too distant past, and it will certainly change the landscape of how aesthetic medicine is practiced in the U.S.
Like any change, there are some good things and some not so good things. With our direct experience working with plastic and cosmetic surgery management services organizations (MSOs) in the past couple of years, we’ve seen the advantages and potential pitfalls play out in real time. Here are our takeaways.
The Good
- Everyone is keen on the idea of a helicopter airlifting a pile of cash directly to their doorstep. And these buyouts can do just that, rewarding surgeons for the years of goodwill and great results they have delivered in their community. This way of monetizing practice value just wasn’t available 5 or 10 years ago, when the main options were to sell to a competitor or transition the practice to younger surgeons who did not have access to the funds needed to fairly pay for the book of business they were inheriting.
- Surgeons are happiest when they are in the OR. Sure, some doctors like some of the aspects of building and running a successful practice. But most don’t. So when a group offers to come in and take things like HR, accounting, and product ordering off their plate, most doctors exclaim loudly “where do I sign?” Taking away the headaches and nitty gritty of running a practice is a huge advantage of a buyout opportunity.
- The onboarding/transitioning process, in our experience, has been pretty seamless. There will always be staff fears and concerns with any organizational change, but private equity groups ease the transition by focusing on the lack of disruption and the consistency of process for most day-to-day operations.
- Surgeon autonomy about medical decisions is mostly unchanged. Every group we’ve worked with so far is serious about leaving care decisions in the hands of the treatment professionals. That said, member and associate surgeons will have performance standards and incentive bonuses that can add pressure, just like doctors in almost all other areas of medicine already encounter.
The Bad
- From what we’ve seen, every organization buying up aesthetic practices has a bit of a different approach. Some run more efficiently than others. Some practice what they preach, some don’t. Some have thoughtful leadership, some don’t. The “bad” part of all this is it can be hard for a surgeon to know exactly what the road ahead looks like when signing on for a buyout. Surprises may be fun on your birthday, but not when it comes to your livelihood. On the plus side, we think as more groups gain more experience, and the ones that aren’t as well structured are bought up by more successful players, the level of consistency and professionalism will likely increase.
- While surgeon autonomy for medical decisions remains mostly intact, there can be some friction when a degree of decision making on other key aspects of running a practice is centralized. For instance, a practice may like their EMR system and a doctor may get pushback from staff if a new system is chosen to streamline costs across all of the MSO’s member surgeons. Or some long-standing vendor relationships may need to artificially end, losing the consistency and personal connections many at the practice value.
- Ownership of some assets is not usually sufficiently spelled out. We’ll look at this in the context of assets we know quite well: websites and web domains. Purchase agreements between surgeons and private equity groups do not generally spell out who owns and who has access to key online assets, including a practice’s website URL, website platform, online content, Google listings, and much more. When it’s not spelled out, this gray area can be a source of confusion and conflict.
The (Potentially) Ugly
The future is unpredictable, and many things in life just don’t work out as planned. We’ve seen this be true for surgeons who joined private equity groups that, shall we say, could not get out of their own way. When management of a group falls apart, funding options dry up, or other unforeseen challenges show up, member surgeons can be left holding a pretty stinky bag of do-do. The objective of simplifying practice and removing headaches can get tossed on its head, leaving these surgeons with a more challenging work environment, frustrating financial ties, major personality conflicts, and worse. It’s certainly not the norm, but it pays to do plenty of due diligence with any private equity group to guard as best you can against this doomsday scenario.
